A Systematic Investment Plan puts a fixed amount into a fund every month. Its two real advantages are behavioural and mathematical: it removes the temptation to time the market, and it gives every instalment a different amount of time to compound.
How to use the SIP Calculator
- Enter your monthly investment amount
- Set an expected annual return — 10–12% is a common long-run assumption for equity funds
- Choose the investment period in years
- Compare the amount invested against the projected maturity value
Where the growth actually comes from
SIP maturity uses the future value of an annuity:
FV = P × (((1+i)ⁿ − 1) / i) × (1+i)with P the monthly amount, i the monthly rate, and n the number of instalments.
The striking part is how lopsided the outcome is. Investing ₹10,000 monthly at 12% for 20 years means ₹24 lakh invested and roughly ₹1 crore at maturity — about 76% of the final value is growth rather than contribution. Run the same thing for 10 years and you get around ₹23 lakh, of which only about half is growth.
Doubling the duration does far more than doubling the result. Time is the variable that matters most, and it is the one you cannot buy back later.
What the projection does not account for
This is a compound-growth model, not a forecast. Several real-world factors sit outside it.
Returns are not steady. Equity markets deliver their long-run average through violent swings. A 12% average can include a year down 30%.
Inflation erodes the number. ₹1 crore in 20 years, at 6% inflation, buys roughly what ₹31 lakh buys today. Think in real terms.
Tax and costs apply. Expense ratios reduce returns annually; capital gains tax applies on redemption. Neither is modelled here.
Frequently asked questions
What return rate should I assume?
For diversified Indian equity funds, 10–12% is a reasonable long-run assumption. Debt funds are nearer 6–8%. Use a conservative figure — a projection that assumes 15% will disappoint.
Is a SIP better than investing a lump sum?
It depends on the market, and nobody knows in advance. Lump sum wins in a rising market; SIP wins in a volatile or falling one by averaging your purchase price. For most people investing out of monthly income, SIP is the only practical option anyway.
Can I lose money in a SIP?
Yes. SIPs invest in market-linked funds and the value fluctuates. Over long periods equity has historically trended up, but there is no guarantee and short-horizon investments can end below what you put in.
Does this account for inflation and tax?
No. It shows nominal growth before costs. Subtract expected inflation to understand real purchasing power, and account for capital gains tax on redemption.